NATURAL CAPITAL IN THEORY AND PRACTICE

Transcription

1 NATURAL CAPITAL IN THEORY AND PRACTICE Phil Cryle Valuing Nature Programme Business School 8 th March 2017 eftec Economics for the Environment Consultancy

2 WHAT IS NATURAL CAPITAL? Source: Mark Regan The elements of nature that directly and indirectly produce value or benefits to people, including ecosystems, species, freshwater, land, minerals, the air and oceans, as well as natural processes and functions Natural Capital Committee (2014) eftec 2

3 WHAT IS NATURAL CAPITAL? eftec 3

4 Inputs from other capital WHY IS NATURAL CAPITAL DIFFERENT? Natural capital stocks Ecological communities Soils Freshwaters Land Minerals Atmosphere Subsoil assets Oceans Ecosystem Service Flows Benefit flows Food Fibre (e.g. timber) Energy Fresh water Clean air Climate regulation Recreation Amenity Biodiversity/ conservation eftec 4

5 USING THE NATURAL CAPITAL FRAMEWORK ADVISORY METRICS 1. Understanding Natural Capital Assets eftec

6 USING THE NATURAL CAPITAL FRAMEWORK What do we have? What does it produce? What is that worth? What does it cost to maintain these benefits? Stocks of natural capital assets Flows of ecosystem services Natural capital benefits (private + external) Natural capital maintenance costs (private + external) e.g. woodland area (hectares) woodland condition (SSSI status, access points) e.g. timber produced (m³) or recreational visits (number) i.e. GBP i.e. GBP eftec 6

7 USING THE NATURAL CAPITAL FRAMEWORK ADVISORY METRICS 1. Understanding 2. Accounting Natural Capital Assets ACCOUNTING eftec

8 Conventional financial accounts reflect the value of natural capital assets to the extent that they produce a financial income or incur a cost Purpose of corporate natural capital accounting (CNCA) is to enable better decisions to be made by organisations about the management of natural capital - Natural Capital Committee priority to develop methodology for CNCA - Private (and quasi-private) sector organisations are responsible for a large proportion of England s natural capital assets (approx. 2/3 land is privately owned) eftec 8

9 Conventional physical assets Natural capital assets Benefits to the company (revenue streams) Benefits to the company and wider society Benefits at a single, local, scale Benefits at multiple scales (local, regional, global) Depreciate in value over finite lifetime Without intervention value may decline or remain stable Value may tend to appreciate over an infinite lifetime Exclusively owned and controlled by the organisation for entirety of useful life Often only partially 'owned' or controlled (e.g. certain use rights) for a defined period of time eftec 9

10 Source: NFI 2012 eftec 10

11 At 31 st March 2016 Recreation 141 Carbon 97 Timber 13 Maintenance Government PES funding /14 annual value ( m per year) eftec 11

12 At 31 st March 2016 Private External Total Financial Assets m m m m Baseline ,600 12,000 1,200 Gain/Loss Addition/Disposal Revaluation Gross Asset Value ,900 12,100 1,300 eftec 12

13 At 31 st March 2016 Private External Total Financial Assets m m m m Baseline ,600 12,000 1,200 Gain/Loss Addition/Disposal Revaluation Gross Asset Value ,900 12,100 1,300 Liabilities m m m m Legal Nil Other Nil Total Maintenance Total Net Natural Capital Assets 11,500 eftec 13

14 1. The long-term value of natural capital assets Assess future flows of costs and benefits to monitor sustainability of natural capital 2. Both private and external values Capture full value associated with natural capital 3. Changes in natural capital Measures change in value over time, relative to an opening value 4. Changes in value, by cause Quantity, quality, beneficiaries, and internal/external factors eftec 14

15 Captured in financial reporting Aesthetics Clean Air Clean Water Energy Climate Regulation Fibre (timber) Food Hazard Protection (flooding) Recreation Woodland Grassland Mountains, moors & heath Enclosed farmland Freshwater Urban Coastal margins Wildlife Initial natural capital account Aesthetics Clean Air Clean Water Energy Climate Regulation Fibre (timber) Food Hazard Protection (flooding) Recreation Wildlife Woodland Grassland Mountain, moors & heath Enclosed farmland Freshwater Urban Coastal margins Significant service flow by habitat Included in account Potentially significant service flow by habitat Partly included in account eftec 15

16 Natural capital asset register Physical flow account Monetary account Maintenance cost account Natural capital stock Accounting unit: Farmland Indicator Units Reference year (2008) Reporting year (1) (2014) Source Area of farmland Hectares Years since organic conversion began Notes Years Years since full organic Years Accounting conversion Years from reporting year* Reference Reporting year unit by Natural capital Ecosystem stock metrics: Indicator Units year (1) Years from reporting year Source Notes Ecosystem Service Flow (2008) Reference Reporting (2014) Service Numbers Rare/protected by Indicator species Units year year (1) Source Notes Number for whole Climate regulation Accounting recorded (2008) (2014) unit estate Carbon Tonnes/ Numbers Estimate Site data Farmland Climate regulation Variety stored of species Ha Number 3,594-2 for whole using TESSA pending Net carbon Values estate Value per Tonnes/ (2014) converted to Farmland Rating sequestrati of SSSI area that As above Species Whole Estate tonne ha/year /tonne Rating Favourable (years 51- DECC (2013) 2014 prices is farmed on carbon carbon 86) using ONS GDP Recreation % arable land contains deflator buffer strips or field Percent margins Visits Total to value Visits to (2014) Visitor Farmland of carbon Estimate Stock value estate Whole Estate % arable parkland area left as Number mn 95, , , , , ,067 survey stored including overwintered per year stubble Percent visitor Recreation Accounting Years from reporting year* Reference Reporting year Parkland or wild bird unit cover by Food Provision Indicator Units year (1) Based on a Source Ecosystem WTP per (2014) Expert review of nonmarket Parkland 2.50 visit /visit (2008) (2014) Consultation with available Data Service judgment Tonnes literature Farmland Tonnes at site Long Soil compaction wheat/ha Woodland Total rating value (2014) Rating 171 Poor the farm for other Ropes Estimate Parkland only recreation 000 NC manager crops Food Provision Forester s (TL Wimpole Farmland Area /tonne Ha Maintenance condition being 150 maintained Management informed with 62 k John Nix As Estimate above 70 As above cost (2014) accounts Notes: * Farmland Forecast based grade on current 1 Soil structure rating /tonne wheat Operating Rating Poor k As above 0 0 Handbook farm 0 manager As above Soils Farmland Total net Lawford Soil type revenue Series - 4 As above wheat NC (2014) 76,400 Series 53,072 53,072 53,072 53,072 53,072 As above As above Fixed cost of production Maintenance Rating Maintained - 3 decreasing, k increasing, As above Biodiversity Soil Organic the farm Matter levels WTP/ ha Operating k Average of maintaining Boatman 140 et al 140 As above managed /ha lower and Nitrogen Whole balance ELS Estate (kg) kg 45, (2010) upper values. Phosphorous WTP/ balance ha NC Visitor and kg -1, Boatman et al (Kg) managed Maintenance kg -1,199-3 /ha 237 k As above. (2010) As above management Potassium balance HLS (Kg) Value of (2014) Sources: Estimate bio. Operating 000 k As above 1. National Trust (2009) Nature conservation evaluation: Wimpole, Cambridgeshire Notes: * Forecast Notes: based * Forecast on current based condition current being condition maintained. being maintained. 2. National Trust (2013) Wimpole Conservation Map. 3. OCIS Public Goods Data Collection (undated) 4. Burton (2004) The Soil Resource eftec 16

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18 The Windsor Estate Approx. 6,400 ha of parkland, woodland Oaks, beeches, rare insect species Land management Managed for public enjoyment Statutory duty to maintain character as a Royal Park Management cost offset by income from property, agriculture and visitors Services supported by natural capital Agriculture Forestry Biomass energy Climate regulation Recreation Amenity eftec 18

19 Ecosystem services Aesthetics Clean Air Clean Water Energy Equable climate Fibre Food Hazard protection Recreation Wildlife Scope of financial account Gardens Agriculture Parkland Woodland Scope of natural capital account Gardens Agriculture Parkland Woodland Significant ecosystem service flow by habitat Included in account Potential but not significant ecosystem service flow Partly included in account No ecosystem service flow by habitat Not included in account eftec 19

20 Annual value (gross) Agriculture 0.1m Rent Timber 0.8m Income Air quality 0.4m External Carbon sequestration < 0.1m External Recreation 3.9m Income & external Amenity 0.6m External Private values based on reported income External values estimated from ecosystem service valuation model Liabilities Annual value Legal obligations < 0.1m SSSIs, public access, biodiversity Other maintenance 0.2m e.g. woodland management Natural capital maintenance costs eftec 20

21 Private External Total Assets m m m Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value eftec 21

22 Private External Total Assets m m m Baseline Gain/Loss Addition/Disposal Revaluation Gross Asset Value Liabilities m m m Legal (0.3) - (0.3) Other (6.4) - (6.4) Total Maintenance (6.7) (6.7) Liabilities: ( 6.7m) Assets: 52.3m Private: 3.3m External 49.0m Net private assets: ( 3.4m) Net natural capital: 45.6m Total Net Natural Capital Assets 45.6 eftec 22

23 Pilot account shows significant net benefit that the Windsor Estate delivers Explicit demonstration of the wider value that is generated Supports continuing long-term management to sustain benefits Business uses of CNCA framework being further explored The Crown Estate Communicate the total contribution of its assets Inform budgetary discussion and allocation of resources across the organisation Assessing performance, engaging staff and priority-setting eftec 23

24 1. Long-term business strategy Identify risks of not maintaining natural capital Identify opportunity for generating new revenue streams (e.g. funding for maintaining natural assets or new markets) 2. Management and decision-making Investment planning (e.g. physical capital, appraising impacts, prioritising maintenance) 3. Reporting Demonstrate health and performance of natural capital to stakeholders 4. Governance Support environmental and social responsibility objectives eftec 24

25 USING THE NATURAL CAPITAL FRAMEWORK ADVISORY METRICS 1. Understanding 2. Accounting 3. Financing FINANCING Natural Capital Assets ACCOUNTING eftec

26 WHO DOES THIS? ADVISORY METRICS FINANCING Natural Capital Assets ACCOUNTING eftec

27 CONTACT Phil Cryle eftec